Fund managers that have traditionally focused on retail investors are being outpaced by their institutional counterparts, who are sucking revenues from the sector with their non-mainstream products.
Institutional managers increased revenues from retail investors by 25% over the past year, whereas those who have trodden that path over the long term saw just an aggregate 11% rise, a consortium of researchers has found.
“Recent revenue gains by institutional managers in the retail market offer compelling evidence that strategies favored by institutions—including non-traditional fixed income, emerging markets debt and equity, alternatives, and multi-asset class solutions—increasingly are making their way into the portfolios of retail investors,” said Jeffrey Levi, partner at Casey Quirk, one of the research consortium.
“Strategies favored by institutions increasingly are making their way into the portfolios of retail investors,” said Jeffrey Levi, partner at Casey Quirk. As they seek to offer institutional strategies to their clients, retail fund sponsors without those capabilities are hiring institutional subadvisors to manage the portfolios, and pursuing acquisitions to gain skills they lack, Levi said.
In 2012, revenue from the retail channel rose 10% for institutional managers and 7% for their retail counterparts. By contrast, in both 2011 and 2010 retail managers generated more revenue growth for the retail market than institutional managers, according to the analysis.
Overall, the fund management industry had combined revenues of $302 billion, the consortium said, with assets reaching $58 trillion by the end of 2013.
However, the epicentre of the sector could be about to shift.
“Even as North America and Europe continue as centers of the global investment management business, our survey respondents indicate that Asia Pacific will be the region with the largest organic growth rate over the next five years,’’ said Fred Bleakley, director of the US and European Institutes, a consortium partner.
The data was published as part of the Performance Intelligence series conducted by the US and European Institutes, McLagan, and Casey, Quirk & Associates.
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